GOP, Dems, and Independents All Agree On One Thing: The SEC’s Whistleblower Program

GOP, Dems, and Independents All Agree On One Thing: The SEC’s Whistleblower Program

The SEC’s Whistleblower Program Has Proven To Be A Unifying Force.

As we head into the 2018 mid-term elections, one refrain seems to be dominating the public headlines: the country is fractured. Fractured over issues stemming from athletes kneeling during the national anthem; fractured over issues surrounding the #MeToo movement; fractured over judicial confirmation hearings; fractured over the state of the economy, or international trade wars, or the environment, or health care, or any number of other things.

Repeatedly, votes in the U.S. Senate and House have been divided straight down party lines. Some commentators have posited that the era of legislation through bipartisan negotiation and hard-fought compromise is a thing of the past, having been replaced by a red-blue color war defined by strict adherence to dogma laid down by each party’s respective leadership.

Yet amid all of this turmoil, one subject has emerged as a beacon of hope. Support for the SEC’s whistleblower program has been a unifying force for members of both of the major parties and independents. They include Senators, Members of Congress, SEC Chairs, SEC Commissioners, and other SEC officials who have all issued public statements strongly supporting SEC whistleblowers and the SEC’s whistleblower program.

Two years ago, I posted a 3-part article predicting the Future Of The SEC Whistleblower Program following the 2016 Presidential election. In part 2 of that article, I pointed out that government whistleblower programs have been around since 1863 and have survived through 28 different Presidents, both Republican and Democrat. I reflected that federal whistleblower programs have historically enjoyed bipartisan support after being enacted. In part 3 of the article, I expressed my belief that Congress would continue to support the SEC whistleblower program.

Recent official pronouncements have borne out this prediction.

The U.S. Capitol

Several U.S. Senators And Congressmen Strongly Support The SEC’s Whistleblower Program.

Just last month, U.S. Senator Charles Grassley (R-IA) wrote a letter strongly supporting the SEC’s whistleblower program. It was addressed to the Chair of the United States Securities and Exchange Commission. Senator Grassley is the Chairman of the United States Senate Committee on the Judiciary. His letter was written on the letterhead of the U.S. Senate Committee on the Judiciary.

In Senator Grassley’s letter, among other things he defended the granting of large SEC whistleblower awards to meritorious whistleblowers. The Senator emphasized that “Congress made a very clear policy choice to prioritize amply rewarding a whistleblower above other priorities” (his italics). He also called the protection of a whistleblower’s identity “a linchpin” of the SEC’s whistleblower program.

Last year, Senator Grassley (R) introduced the SEC Penalties Act. That bill sought to increase the amount of civil penalties available to the SEC under the federal securities laws. Democratic Senators Jack Reed (D-RI), Patrick Leahy (D-VT), and Heidi Heitkamp (D-ND) joined Senator Grassley in introducing that bill.

Approximately one month after the bipartisan SEC Penalties Act was introduced, U.S. Representative Jeb Hensarling (R-TX), the Chairman of the U.S. House of Representatives Financial Services Committee, released a discussion draft of his Financial CHOICE Act 2.0, which preserved the SEC whistleblower program almost entirely in its original form. (The only change that Representative Hensarling proposed in the draft was to make culpable whistleblowers who had engaged in the securities frauds themselves ineligible to receive SEC whistleblower rewards.)

Also last year, Senator Grassley (R), along with U.S. Senator Pat Roberts (R-KS), the Chairman of the Senate Agriculture Committee, sent a letter to the CFTC calling for increased whistleblower protections. The CFTC’s whistleblower program was created by the Dodd-Frank Act, the same Act that created the SEC whistleblower program.

Although that letter was not signed by any Democrats, in 2014 eight Members of the U.S. House of Representatives sent a letter to the then-Chair of the SEC calling for increased SEC whistleblower protections. That letter, written on the letterhead of the U.S. House of Representatives Committee on Financial Services, was signed by Representatives Maxine Waters (D-CA), Elijah Cummings (D-MD), Gwen Moore (D-WI), Jackie Speier (D-CA), Keith Ellison (D-MN), Tammy Duckworth (D-IL, now a Senator), Stephen Lynch (D-MA), and Matt Cartwright (D-PA).

The SEC’s Home Office, Washington, D.C.

Both SEC Chairs Have Uniformly Praised The SEC’s Whistleblower Program.

Since the SEC’s whistleblower program was created in 2010, there have been two different Chairs of the SEC. The current SEC Chair is Jay Clayton. Mr. Clayton is an Independent who was nominated by a Republican President (President Trump).

Earlier this year, Mr. Clayton issued a public statement in which he called the SEC’s whistleblower program a “groundbreaking program” that “is a critical component” in the SEC’s enforcement arsenal. According to Mr. Clayton, SEC whistleblowers have “contributed significantly to our ability to detect wrongdoing and better protect investors and the marketplace, particularly where fraud is well-hidden or difficult to detect.”

Mr. Clayton’s predecessor as SEC Chair was Mary Jo White, a Democrat who was nominated by a Democratic President (President Obama).

In 2016, Ms. White testified before the U.S. Senate Committee on Banking, Housing and Urban Affairs that SEC whistleblowers have had “a transformative impact on our enforcement program”. The SEC’s Director of Enforcement at the time echoed Ms. White’s testimony during a speech he gave later in the year. During November 2016, Ms. White gave a speech in which she stated that SEC whistleblowers “have become key sources of very significant cases” and asserted that “The SEC intends to stay on the whistleblower beat to ensure protection of whistleblowers …”

SEC Commissioners From Both Parties Laud The SEC’s Whistleblower Program.

A few months ago, all three of the then-active SEC Commissioners released public statements commending the SEC’s whistleblower program. Those Commissioners were Kara Stein (D), Hester Peirce (R), and Robert Jackson, Jr. (D). (The fourth Commissioner, Michael Piwowar, had already announced that he would be stepping down. The Senate had not yet confirmed his replacement, Elad Roisman.)

Commissioner Stein (D) called the SEC’s whistleblower program“a resounding success” and “good government”. She added that the program “has more than paid for itself. There are not many government programs that can make that claim”. According to Ms. Stein, the SEC has received more than 22,000 whistleblower tips, resulting in over $1.4 billion in financial remedies “the majority of which has gone back to harmed investors.”

Commissioner Peirce (R) asserted that “The SEC’s whistleblower program is a critical part of our enforcement program”. She also recognized that “The most important part of our Whistleblower Program, of course, is the whistleblowers themselves, who bring to our attention securities law violations that otherwise might not come to light for years or even forever”.

Commissioner Jackson (D) explained that whistleblowers are “crucial” to the SEC, and that “experts of all stripes have said that this program — which rewards those who make the difficult decision to come forward to help us expose fraud — is among our Staff’s most successful endeavors”.

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As an SEC whistleblower law firm, The Pickholz Law Offices has represented employees, officers, and others in SEC whistleblower cases involving financial institutions and public companies listed in the Fortune Top 10, Top 20, Top 50, Top 100, Top 500, and the Forbes Global 2000. We were the first law firm ever to win an SEC whistleblower award for a client on appeal to the full Commission in Washington, an achievement that Inside Counsel magazine named one of the five milestones of the SEC whistleblower program.

For more information about The Pickholz Law Offices, you can click on any of the links in the margins of this page.